What is a short sale and how does it work?

Short Sale....a real estate sales method that occurs when the lender(s) accept less cash from the sale of a home than they are owed. That's it. It is that simple.

Unfortunately for sellers, it is not so simple. There is stress along the way and credit ramifications that should be considered before entering into this type of sale method. Let's discuss your options and the reasons you may need to enter into a short sale.

You are behind in your mortgage payments and cannot catch up. You absolutely have to move, in both cases the net value of proceeds are less than is owed the lender. These are the two main reasons I have seen people in short sale situations. If you know your are in this situation, act sooner rather than later and employ a real estate agent that has experience with short sales. If you ignore the problem .......it will not go away!

Please understand the mechanics of the sale and what to expect before you get started. This is not for the faint of heart. You need to select an agent who is a tough negotiator, patient and experienced. First, ask your agent to prepare a "seller's net sheet" to demonstrate the shortfall of funds that is expected at specific sales prices. It is essential that you disclose to the agent any and all loans and liens against the property. The proceeds may be much different than you originally thought they would be. It is also very helpful to prepare a letter addressed to your lender authorizing the agent to discuss your account with them. Contact the lender to see if they are willing to entertain the idea of a short sale. There may be occasions when a lender may simply refuse to consider a short sale, then your options will change.

You're home should be aggressively priced and marketed by the agent you selected. If you are running out of time you do not have the luxury of playing with the pricing, you need a contract. You're agent should disclose in the listing that the sale is subject to third party approval. Even though you still own the property, you cannot clear title in this type transfer unless you can pay the lender in full. This is the reason for third party approval. Be prepared to stick this out. Most lenders today are overwhelmed with loans going bad and foreclosures. It can take months to get a short sale approved after the contract is submitted to the lender. The buyer involved must be willing to wait for the lender's decision, if not, it's not worth the time and energy to begin the process.

Make it you're responsibility to become educated regarding the ramifications this type sale has on your credit and tax situation. Real Estate Agents are prohibited from giving legal or tax advice. Our job is to bring a qualified buyer and seller together while representing the best interest of our client.

A short sale isn't for every situation and it certainly isn't the end of the world.

Call me if you need information.